Observations focused on the problems of an underdeveloped country, Venezuela, with some serendipity about the world (orchids, techs, science, investments, politics) at large. A famous Venezuelan, Juan Pablo Perez Alfonzo, referred to oil as the devil's excrement. For countries, easy wealth appears indeed to be the sure path to failure. Venezuela might be a clear example of that.

Archive for November 22nd, 2012

Yesterday, I was planning to write about Minister’s Giordani’s remarkable statement on the state TV station VTV, to the effect that in his opinion ““regalado” se debe acabar en el país, El gratis se acabó y el regalado se tiene que acabar”, which loosely translated says “giveaways have to end in this country. Free is over and giveaways have to end”. Then today, I read Gustavo’s piece and thought he had covered it, but that Giordani has the audacity to say what he said, requires that I rant about it, even if Gustavo covers it quite well.

I used to think that Giordani was intellectually honest, a misconception he dispelled long ago, but his latest statement is simply outrageous coming from him. Let’s start with the fact that this is the first time that he has made such a statement and that Giordani has been part of the Chávez administration for more than twelve of the last fourteen years. He has held no irrelevant positions, having been either Minister of Planning, yes Planning with a capital P, and now he holds the dual portfolios of Planning and Finance. During that time, he has also been on the Board of the Central Bank, for about twelve or thirteen of those years and on he Board of PDVSA for a couple of years. So, he can’t argue he did not participate in decisions.

As a way of background, Giordani was the leader of Chávez’ transition team and wherever he went he would say “We have different ideas”. And he (they) did. Caldera’s Government had been adjusting gasoline prices to the export price quarterly, which candidate Chávez requested be suspended until after the election. Prices have been held at the same level since them, making them essentially free today at less than $0.30 dollars per gas tank at the informal rate, or a buck at the official one.

Additionally, in the year 2000, the Chávez Government froze electric rates. They have been frozen since then, but the currency has gone from about Bs. 0.7 per US$ to Bs. 4.3 at the official rate or almost triple that at the parallel rate, so that electricity is also essentially free today, thanks to Chávez and I imagine the Planning Minister was part of this stupid decision, which is in part responsible for the huge electricity crisis the country has suffered over the last four years.

Also in the year 2000, exactly 12 years ago, the Chávez Government froze the basic unlimited residential telephone rate at Bs. 62 per month, about $15 at the official rate, or about $4 at the “unmentionable” rate. The rationale for this is even more Machiavellic, not only does it keep the price down, satisfying populist desires, but at the same time, it guarantees that 8% of the CPI will not increase.

Then, the Chávez Government created Mercal as a way of selling heavily subsidized food of all sorts, thus representing another giveaway sponsored, created and executed by Chávez and Giordani. Note that I am not personally against some subsidies in certain foodstuffs, but Mercal created subsidies for a large variety of products, many of which Venezuela does not even produce in sufficient quantity, requiring additionally that they be imported.

There are many more examples, like subsidizing the well to do with CADIVI dollars so that they can buy things online cheaper or travel cheaply. To say nothing of the bonds sold to the rich at a subsidized exchange rate. Yes, they stopped that a couple of years ago, after issuing some US$ 30 billion of them.

I could go on, but I am sure your get the idea: All of these distortions, absurdities, giveaways and free stuff were invented, created, implemented and executed while this sinister figure of Chavismo held some of the top positions in Government and without him ever publicly objecting to any of them. On the contrary, he has defended many of them and defended his almighty boss Hugo Chávez. After all, none of these policies follows any economic or social logic, their only objective is to guarantee that Chávez and his empty revolution stay in power, nothing more, nothing less. Because that has been the foundation of Chávez’ economic policies: Offer to give away, give away and promise to provide everything for free, that is in the end the only “socialism” that Chávez has proposed or offered. Without this, Chávez would have been long gone. That is all he is in the end, the prmise of free stuff.

But what is worse is that Giordani has imposed all sorts of other idiotic policies on the Venezuelan economy since 1998 that have led to sustained 20%-plus inflation, a destruction of the productive sector and the creation of half a dozen distortions that will be very costly to remove. If he fails to understand that his ideology has the consistency of tapioca on the free stuff, how can he get that he has really screwed up with the rest, given that he has no clue as to how an economy functions?

In the end, the “boy” from San Pedro Macoris has done terrible damage to Venezuela and its economy, but he will never recognize what an incompetent, dishonest and destructive politician he has been. Pity his family took that boat to Venezuela, his arrogance and ignorance will leave a heavy economic burden on all of us.